Developers, landlords and occupiers all seek experiences that elevate a location’s appeal, driving both economic growth and favorable real estate outcomes. Experience can be an emotion rather than a tangible feature, but we all know it when we see it (or feel it). Places that entertain, enhance work productivity, and provide desirable living conditions all in a cohesive way stand to benefit.
Experience is a difficult thing to measure, but understanding the emotional connection between people and the built environment is crucial to unlocking its full potential and benefits. As far back as 1998, the rise of experiences External Link was acknowledged as the next state for the consumer economy, delivering memories instead of just (tangible) products or (intangible) services. Retail and hospitality brands create experiences for shoppers and tourists in their stores and hotels. By extension, experience is most obviously associated with “Play” in the “Live, Work, Play” moniker of real estate—that is retail, hotel and lodging, and other anchoring institutions like museums, theatres, arenas, and stadiums. And from our in-depth research report, Reimagining Cities, we know that an optimal level of “Play” real estate is associated with the best outcomes for a Downtown’s GDP, foot traffic, and valuations, revealing a critical role that it plays in facilitating economic vitality for Walkable Urban Places in the urban core.
Experience happens, however, in all sectors. Firms can also create experiences for their workers, landlords for their tenants, business improvement districts (BIDs) for their members and communities and so on. This is evident in the wide range of roles within various industries that are inherently tied to experiential concepts, such as artists, bartenders, servers, actors, dancers, designers, and community association managers, among others.
Furthermore, a curated environment or atmosphere that creates an experience, whether in a building or its neighborhood, is the true scope of the experiential economy as it is borderless and unconfinable to specific kinds of real estate.
Data and observation tell us that the experience economy is permeating the world around us in a real way. U.S. consumers, who power and make up more than two-thirds of GDP, are dedicating a near-record one-quarter of their budget to services that are tied to experiences—salons, fitness centers, restaurants, concerts, sporting events, or other recreational activities. A most obvious demonstration of experience happens in the form of travel and tourism, a sector whose direct output in the U.S. has grown from $976 billion in 2015 (5.2% of GDP) in real terms to $1.2 trillion in 2023 (5.4% of GDP). Nearly two-thirds of tourism is referred to as “urban tourism,” most of which takes place in Walkable Urban Places. The real estate footprint within cities therefore significantly impacts the ability to give experiences both to residents and commuters, as well as visitors. Not only do visitors comprise a majority of foot traffic throughout cities, but specific places were associated with attracting a large share of them. Anchor institutions account for only 1.2% of real estate inventory in Walkable Urban Places but drive a whopping 25% of all foot traffic. Positive economic impacts also stem from the fact that visitors have multiplier effects: for every $1 of direct spending from tourism results in another $0.73 of spending in the broader economy.
In this series, we will explore how the rise and integration of experiences manifests across all sectors and, ultimately, across all different kinds of real estate.
